GST cut unlikely on smartphones, 18% tax may continue: Industry sources

Amid ongoing talks on rate rationalisation, a GST cut is reportedly on the cards for several consumer goods. Smartphone makers, however, are not expecting many changes in their present GST rate structure.

Industry sources told Fortune India that there is very little hope that the present rate of 18% GST will be brought down to 5% give there is only conversation around two slab structure with 18% to remain in existence.

“Had there been conversation around a 12% slab being in place instead of an 18% slab, we still would have hoped for some relief, however, we are not aware of any change yet,” says one source from a key industry player.

Another industry source adds that the mobile phone makers do not expect the rates to be brought down to 5% from the current 18%, and unless that happens, there will not be any change in smartphone prices.

The two-day GST Council meeting chaired by finance minister Nirmala Sitharaman began on Wednesday in New Delhi, to discuss tax cuts on the majority of items. There is speculation that the announcement for the rate cuts may be made on Thursday evening. Along with rate cuts, the Council is expected to have discussed the three-pillar reforms proposal by the ministry aimed at structural changes and ease of doing business push.

In past days, the India Cellular and Electronics Association (ICEA) had urged the government to reduce GST on mobile phones and related components from 18% to 5% in the upcoming reforms, arguing that phones are essential goods and the main tool of digital access for over 90 crore Indians. The GST rate on phones was raised from 12% to 18% in 2020. Before GST, according to ICEA, most states kept mobile phones under essential goods category under a 5% VAT.

A lower GST rate would lead the smartphone makers to pass on the benefits to consumers enhancing affordability and boosting demand ahead of the festive season.

Yet, due to the recent government push on indigenisation of smartphone manufacturing, there may be some relief to smartphone makers manufacturing products within India.

India’s mobile phone manufacturing industry is currently estimated to be around ₹5.45 lakh crore in FY25, according to ICEA, with exports set to cross ₹2 lakh crore.